"Obamacare": The Great Debate

We are all watching a historic event as the "Gang of Nine" takes up the question of the President's health care mandate. My question is in the event they reject the mandate, flawed though it might be what is our societal Plan B?

“Obamacare"- the Great Debate

Like a lot of other people I am watching the proceedings at the Supreme Court with a lot of interest. Unlike many others I am concerned that if the Court simply elects to throw out the law I am concerned about plan B.

I have been involved with health care in at least a peripheral sense for better than 30 years, but only anecdotally as a consumer. As a practicing human resources manager and executive I was involved as a provider. We didn’t of course directly provide health care and health care management services to our employees, but we had a very important role as we paid for those services for our employees and their dependents.

I recognize I am dating myself, but I remember when health care benefits were part of what we referred to as fringe benefits- an ancillary cost to providing competitive wages to our employees. In those days with inflation and wages going up at 13 and 14% per year we barely kept our eye on the ball in this area. Then a funny thing happened- wage inflation slowed down, but medical inflation did not. It suddenly hit our radar screen that this fringe benefit wasn’t so fringy anymore. That trend has continued with the cost of providing health and retirement benefits now consuming a huge part of most organizations talent acquisition and retention costs, especially in the public sector.

There are a number of factors that cause the U.S. to have one of the highest cost/lowest efficiency health management and health care delivery systems in industrial societies. We spend well over 17% of our GDP annually delivering health care and that number continues to move up- not down.

By contrast Switzerland spends 11% and Taiwan 7%.

Some of the factors causing that include technology, distribution, inefficiency, and a lot of other contributors. Bluntly over 60% of our health care expenditures are directly related to patient/consumer behavior. We do a poor job of managing heath and involving consumers in a meaningful way in the management and responsibility for their own health.

Our outcomes aren’t particularly spectacular either; while it is true that if you can afford it some of the best care in the world is available in the U.S., but our national health measured by mortality and morbidity as an average is pretty mediocre.

We are consistent, a recent study by the International Federation of Health Plans examined the costs of 23 different medical procedures ranging from routine checkups to MRIs to Lipitor and found that the costs for the services was higher in the U.S. than any other participating country for 22 out of 23 services. No other participating country currently spends more than 12% of GDP in providing care. That means we are spending 41% more than the least efficient of those other countries.

When I was new to the game, my employers used the standard solutions to address many of these issues:

Beat up the providers and carriers

Begin a long and arduous process of “cost sharing” with our employees ranging from methods like higher deductibles and co-pays to eliminating coverage and scaling back coverage for retirees, dependents and other groups.

Cutting out the “middle man” and moving to self- insurance to gain administrative savings.

I was in that group. Not being that smart and having recently been exposed to new concepts like total quality management and process improvement I didn’t understand why we couldn’t apply many of those techniques to the management of health and the delivery of health care. I even promoted more radical thinking- actually engaging and involving employees and their dependents in the management of their own health and health care. The interesting thing is that we saw significant positive outcomes not only directly to our bottom line, but indirectly as morale improved and employees felt more engaged and valued- go figure.

I recognize that may not sound particularly enlightened today, but this was 30 years ago.

One of the things I began to understand back then is a concept that we now refer to as social literacy. The truth is the process of delivering, pricing, and administering health care in the U.S. is incredibly opaque, obscure, and arcane. It scares and confuses the average person enormously. It has a language all of its own spoken of in hushed tones using acronyms and language that shuts people out.

There are other factors at play as well that the Average American has little or no appreciation or understanding of as it relates to health care.

Reserved Area

One of those concepts is what we call adverse selection. Adverse selection is what the principle of insurance tries to mitigate or correct for across a group. At its most simplistic it means that we only want to pay for a service when we need it rather than preventatively. Given a choice only sick people or people who anticipate a need for a service want to pay for it. A great illustration is for any of us who have had the opportunity to pay for closer to the true costs of providing health insurance either by virtue of self -employment or losing our employer based coverage and looking at paying for coverage under COBRA.

The interesting thing about COBRA is that even though there is sticker shock you are still looking at coverage that is advantageous both in its breadth and depth and in its cost as you are seeing a group rate.

Most individual policies offer much more limited coverage and much higher rates. To illustrate the effects of adverse selection even more graphically the sickest 5% of our population account for 50% of the total health care expenditures.

We have actually added to that issue through the contraction of the economy. As more Americans lose employer based coverage the solution in many cases is to do without. What the result is that much of our health care delivery has shifted to emergency rooms to treat situations that have hit critical mass. To compound that issue even further much of that care is delivered by not for profit organizations or public institutions so the provider is not reimbursed. The effect is those costs get shifted to those with insurance or paying patients just like the costs of shop lifting gets passed along.

We have also done very little over the last three decades about managing demand. Obesity, direct and indirect costs related to work related stress and economic insecurity and other factors costs us billions annually.

Studies show that literally 60% of health care related costs in the U.S. are directly related to and can be affected by changes in individual behavior; to put it simply taking proactive rather than reactive action.

So you might ask yourself why we aren’t addressing this. I would posture several reasons:

We created very deliberately a kind of codependency with our employees originating with the Industrial Revolution. In return for compliance and loyalty we agreed to provide employees with a safety net. Management thinks, you do. You don’t need to be educated or participate in decision making.

Role definition. I have heard and continue to hear from employers for over 30 years that “we aren’t in the health care business”. While I don’t disagree entirely I could make the same argument about working with a key supplier about components in your manufacturing or production process. What the total quality movement, or TQM taught us is that by partnering with key suppliers we could improve our own efficiency and sustainability.

Systemic versus silo thinking. In truth very few people think systemically and have a full appreciation for how things work together. We “get” our part.

Inertia. Changing behavior and patterns is hard. Few of us will make meaningful changes without a crisis as a catalyst. If my employer has always “taken care of” this issue I am not inclined to find it broken. Previous solutions included off shoring, outsourcing, etc.

Partial solutions. I do not see the current plan as a panacea. One of my biggest concerns is that it addresses almost exclusively the supply side of the house- the delivery of care. It does little to address the management of health or encourage individuals to participate in the management of their health other than paying for care.

Flawed models. Our current financial model is deeply rooted in health care delivery. You get paid for delivering care not preventative medicine.

As you might suspect I am a pretty big advocate of wellness and managing health not delivering health care as a singular solution. The best health management strategies incorporate several dimensions:

Education about health and lifestyle management (Social literacy)

Behavioral/lifestyle changes

Exercise and movement

Ongoing communication and consumer engagement

Reinforcement and incentivization

Reserved Area

If you look at those elements neither the health care industry or government is well positioned to address all of those elements. If on the other hand we look at the issue systemically and government, health care, the educational system, and employers combine to create a collaborative integrated model we can see results and see them pretty quickly.

Integrated models in several thought leading organizations are yielding per capita reductions ranging from 5 to 12% per annum in as short a time frame as 12 to 18 months! That represents literally billions of dollars annually.

My point here is that when the Court decides which way to land on this issue we need to ask ourselves – “What is Plan B?”

We are facing a time in our history and society where many of the old models don’t work.

We know that over 70% of our workforce is not actively engaged and it is costing us trillions in lost productivity, health care related expenditures and just general poor quality of life.

C level compensation the last couple years has increased an average of 20% per annum while the average American has seen a 2% increase in their wages, but we have people who don’t understand the anger and the frustration of the “99%”.

The market is up, but unemployment and underemployment remain very high.

I am passionately committed to concepts like personal responsibility, personal competency and a free market society.

I don’t want to see more government, especially in areas I feel they are not well positioned, well informed, or accountable for outcomes as well as process.

When the Court makes its decision it has the luxury of being held harmless from providing any alternative solutions or asking themselves the impact on our economy or quality of life. They can address this issue entirely in the abstract- an academic exercise. Unfortunately if you are an employer or consumer the same can’t be said.

I in candor find much of the political rhetoric we are being subjected to on both sides of the aisle as being tiresome and bad theater. I guess I just wish I was seeing a bit more focus on solutions and a little less investment in pyrrhic victories.

I would like to see a little more execution and execution as defined by Larry Bossidy-

The ability to mesh strategy with reality, align people with goals, and achieve the promised result.

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